Did the Legal Form Matter for the Level of Bankruptcy Risk of Agricultural Enterprises During the COVID-19 Pandemic?

Sylwester Kozak, Agata Wierzbowska

Abstract


Theoretical background: Conducting an agricultural activity during the COVID-19 pandemic became difficult due to restrictions on movement, the requirement to maintain a social distance in interpersonal contacts, restrictions on direct sales of agricultural products at the farmer markets, and, above all, due to the inability to recruit foreign seasonal workers to work with the harvest. On the other hand, despite difficult external conditions, in the years of 2020–2021 the Polish agriculture significantly increased the value of global production and sales of its products on domestic and foreign markets.

Purpose of the article: This study aims to examine the strength and direction of the impact of the COVID-19 pandemic on the risk of bankruptcy of agricultural enterprises in Poland, as well as to check whether the legal form of the enterprise has a significant impact on this relationship.

Research methods: The study was conducted based on financial data from the EMIS database on a sample of four thousand agricultural enterprises operating in Poland in 2014–2021. The Z-score for non-financial enterprises from EM countries was used to measure the level of enterprise bankruptcy risk. To assess the impact of the COVID-19 pandemic on the value of enterprises' Z-score, panel estimations with fixed effects, taking into account macroeconomic and enterprise-specific variables, were used.

 Main findings: The research showed that for the entire group of agricultural enterprises, changes in economic and regulatory conditions caused by the COVID-19 pandemic had a positive impact on their resistance to the risk of bankruptcy. A positive impact was found in all groups of enterprises, being statistically significant in the case of limited liability companies and insignificant in the case of cooperatives, joint-stock companies and other legal forms. Moreover, the increase in inflation of agricultural products and specific characteristics/parameters of enterprises, i.e. improved profitability of operations, increase in assets and the share of equity in the financing structure, as well as an increase in the use of short-term financing, had a positive impact on reducing the risk of bankruptcy. The research conclusions can be used to optimally prepare agricultural enterprises to withstand possible future external shocks. This article contributes to the literature in the following areas: the impact of the COVID-19 pandemic on the level of bankruptcy risk of Polish agricultural enterprises, as well as the impact of the legal form of an agricultural enterprise on its resistance to bankruptcy in the face of a crisis shock.


Keywords


agriculture; agricultural enterprises; bankruptcy; Z-score; COVID-19

Full Text:

PDF

References


Altman, E.I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589–609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x

Altman, E.I. (1983). Corporate Financial Distress. A Complete Guide to Predicting, Avoiding, and Dealing with Bankruptcy. John Wiley and Sons.

Altman, E.I., Iwanicz-Drozdowska, M., Laitinen, E., & Suvas, A. (2017). Financial distress prediction in an international context: A review and empirical analysis of Altman’s Z-Score Model. Journal of International Financial Management & Accounting, 28(2), 131–171. https://doi.org/10.1111/jifm.12053

Alves, P., Blanco, R., Mayordomo, S., Arrizabalaga, F., Delgado, J., Jiménez, G., Asenjo, E., Montes, C., & Trucharte, C. (2020). Recent developments in financing and bank lending to the non-financial private sector. Banco de España Economic Bulletin, 4.

Antonowicz, P., & Antonowicz, A. (2022). The capacity to forecast enterprise insolvency on the Polish market using the precursory Altman Z-Score Model (1968). Annales Universitatis Mariae Curie-Skłodowska, sectio H – Oeconomia, 56(5), 7–26. https://doi.org/10.17951/h.2022.56.5.7-26

Blanco, R., Mayordomo, S., Menéndez, A., & Mulino, M. (2020). Spanish non-financial corporations’ liquidity needs and solvency after the COVID-19 shock. Banco de España Occasional Working Paper. https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/20/Files/do2020e.pdf

Blazy, J.M., Causeret, F., & Guyader, S. (2021). Immediate impacts of COVID-19 crisis on agricultural and food systems in the Caribbean. Agricultural Systems,190, 103106. https://doi.org/10.1016/j.agsy.2021.103106

Boratyńska, K. (2022). The scale of corporate bankruptcies during the COVID-19 pandemic. Polityki Europejskie, Finanse i Marketing, 28(77), 23–34. https://doi.org/10.22630/PEFIM.2022.28.77.12

Chebby, F., Mmbaga, N., & Ngongolo, K. (2024). Impact of COVID-19 pandemic on tourism, income of local communities and biodiversity conservation: Evidence from Burunge wildlife management area, Tanzania. Heliyon, 10(2), e24327. https://doi.org/10.1016/j.heliyon.2024.e24327

Cortignani, R., Carulli, G., & Dono, G. (2020). COVID-19 and labour in agriculture: Economic and productive impacts. Italian Journal of Agronomy, 15, 1653. https://doi.org/10.4081/ija.2020.1653

Du, Z., Lai, X., Long, W., & Gao, L. (2020). The short- and long-term impacts of the COVID-19 pandemic on family farms in China – evidence from a survey of 2 324 farms. Journal of Integrative Agriculture, 19(12), 2877–2890. https://doi.org/10.1016/S2095-3119(20)63390-1

European Central Bank. (2020). The euro area bank lending survey. Fourth quarter of 2020. European Central Bank, Frankfurt am Main, Germany. https://www.ecb.europa.eu/stats/ecb_surveys/bank_lending_survey/html/ecb.blssurvey2020q4~e89c77d212.en.html

European Central Bank. (2021). Financial Stability Review May 2021. European Central Bank, Frankfurt am Main, Germany. https://www.ecb.europa.eu/pub/pdf/fsr/ecb.fsr202105~757f727fe4.en.pdf

Fernández, A. (2021). The economic performance of Spanish provinces during 2020 and its determinants. Banco de España Economic Bulletin, 1.

Fernández, A., González, B., Izquierdo, M., & Moral-Benito, E. (2021). The economic impact of COVID-19 on Spanish firms according to the Banco de España business activity survey. Banco de España Economic Bulletin, 1.

Fitzpatrick, P.J. (1932). A comparison of ratios of successful industrial enterprises with those of failed firms. Certified Public Accountant, 12, 727–731.

Food and Agriculture Organization of the United Nations. (2020). Migrant workers and the COVID-19 pandemic. Food and Agriculture Organization of the United Nations, Rome, Italy. https://www.fao.org/3/ca8559en/CA8559EN.pdf

Gu, H., & Wang, Ch. (2020). Impacts of the COVID-19 pandemic on vegetable production and countermeasures from an agricultural insurance perspective. Journal of Integrative Agriculture, 19(12), 2866–2876. https://doi.org/10.1016/S2095-3119(20)63429-3

Hatab, A.A., Lagerkvist, C-J., & Esmat, A. (2020). Risk perception and determinants in small- and medium-sized agri-food enterprises amidst the COVID-19 pandemic: Evidence from Egypt. Agribusiness, 37, 187–212. https://doi.org/10.1002/agr.21676

International Monetary Fund. (2021). World Economic Outlook. International Monetary Fund, Washington, D.C., USA. https://www.imf.org/en/Publications/WEO/Issues/2021/07/27/world-economic-outlook-update-july-2021

Jędruchniewicz, A., Kozak, S., Maśniak, J., & Mikuła, A. (2024). Kanały i mechanizmy oddziaływania pandemii COVID-19 na rolnictwo w Polsce. Wyd. SGGW.

Johansson, M., Hedenskog, L., Trångteg, R., Lindkvist, E., & Hahn, Ch. (2024). Effects of the Covid-19 pandemic on the Swedish Biogas Sector. Energy for Sustainable Development, 78, 101378. https://doi.org/10.1016/j.esd.2024.101378

Juergensen, J., Guimón, J., & Narula, R. (2020). European SMEs amidst the COVID-19 crisis: Assessing impact and policy responses. Journal of Industrial and Business Economics, 47(3), 499–510. https://doi.org/10.1007/s40812-020-00169-4

Kaya, O. (2022). Determinants and consequences of SME insolvency risk during the pandemic. Economic Modelling, 115, 105958. https://doi.org/10.1016/j.econmod.2022.105958

Kozak, S. (2023). COVID-19 pandemic and changes in the size and structure of agricultural production in Poland. Annals of the Polish Association of Agricultural and Agribusiness Economists, 25(4), 214–227. https://doi.org/10.5604/01.3001.0054.0864

Kumar, A., Padhee, A.K., & Kumar, S. (2020). How Indian agriculture should change after COVID-19. Food Security, 12, 837–840. https://doi.org/10.1007/s12571-020-01063-6

Kumar, P., Singh, S.S., Pandey, A.K., Singh, R.K., Srivastava, P.K., Kumar, M., Dubey, S.K., Sah, U., Nandan, R., Singh, S.K., Agrawal, P., Kushwaha, A., Rani, M., Biswas, J.K., & Drews, M. (2021). Multi-level impacts of the COVID-19 lockdown on agricultural systems in India: The case of Uttar Pradesh. Agricultural Systems, 187, 103027. https://doi.org/10.1016/j.agsy.2020.103027

Merwin, C.L. (1942). Financing Small Corporations in Five Manufacturing Industries. National Bureau of Economic Research.

Mirza, N., Rahat, B., Naqvi, B., & Rizvi, S.K. (2023). Impact of Covid-19 on corporate solvency and possible policy responses in the EU. The Quarterly Review of Economics and Finance, 87, 181–190. https://doi.org/10.1016%2Fj.qref.2020.09.002

Mutegi, J., Adolwa, I., Kiwia, A., Njoroge, S., Gitonga, A., Muthamia, J., Nchanji, E., Mairura, F., Majumdar, K., Zingore, S., Oberthur, T., Kiremu, M., & Kansiime, M. (2024). Agricultural production and food security implications of Covid-19 disruption on small-scale farmer households: Lessons from Kenya. World Development, 173, 106405. https://doi.org/10.1016/j.worlddev.2023.106405

Narodowy Bank Polski. (2021.) Senior loan officer opinion survey on bank lending practices and credit conditions. 1st quarter 2021. Narodowy Bank Polski, Warszawa. https://www.nbp.pl/en/systemfinansowy/kredytowy1_2021_en.pdf

Nehrebecka, N. (2021). COVID‑19: Stress-testing non-financial companies: A macroprudential perspective. The experience of Poland. Eurasian Economic Review, 11(2), 283–319. https://doi.org/10.1007/s40822-020-00163-0

Nielsen, R., Villasante, S., Polanco, J.M., Guillen, J., Garcia, I.L., & Asche, F. (2023). The Covid-19 impacts on the European Union aquaculture sector. Marine Policy, 147, 105361. https://doi.org/10.1016/j.marpol.2022.105361

Ogada, M.J., Justus, O., Paul, M., Omondi, S.G., Juma, A.N., Taracha, E., & Ahmed, H. (2021). Impact of COVID-19 pandemic on African indigenous vegetables value chain in Kenya. Agriculture & Food Security, 10(52). https://doi.org/10.1186/s40066-021-00328-3

Organization for Economic Co-operation and Development. (2021). One year of SME and entrepreneurship policy responses to COVID-19: Lessons learned to “build back better”. Organization for Economic Co-operation and Development, Paris, France. https://www.oecd.org/coronavirus/policy-responses/one-year-of-sme-and-entrepreneurship-policy-responses-to-covid-19-lessons-learned-to-build-back-better-9a230220

Priyadarshini, P., & Abhilash, P.Ch. (2021). Agri-food systems in India: Concerns and policy recommendations for building resilience in post COVID-19 pandemic times. Global Food Security, 29, 100537. https://doi.org/10.1016/j.gfs.2021.100537

Shafi, M., Liu, J., & Ren, W. (2020). Impact of COVID-19 pandemic on micro, small, and medium-sized Enterprises operating in Pakistan. Research in Globalization, 2, 100018. https://doi.org/10.1016/j.resglo.2020.100018

Smith, R., & Winakor, A. (1935). Changes in financial structure of unsuccessful industrial corporations. The Accounting Review, 10(2), 174–184.

Statistics Poland. (2022). Statistical Yearbook of Agriculture. Editions for the years 2015–2022. Warsaw.

Statistics Poland. (2023). Quarterly national accounts of gross domestic product 2018–2022. Warsaw.

Srebro, B., Mavrenski, B., Bogojević Arsić, V., Knežević, S., Milašinović, M., & Travica, J. (2021). Bankruptcy risk prediction in ensuring the sustainable operation of agriculture companies.Sustainability, 13(14), 7712. https://doi.org/10.3390/su13147712

Szczepaniak, I., Ambroziak, Ł., & Drożdż, J. (2020). Impact of the COVID-19 pandemic on food processing and Polish agri-food export. Insurance in Agriculture – Materials and Studies, 73, 141–163. https://doi.org/10.48058/urms/73.2020.3

Vavrek, R., Kravcáková, I., & Kotulic, R. (2021). Evaluating the financial health of agricultural enterprises in the conditions of the Slovak Republic using bankruptcy models. Agriculture, 11, 242. https://doi.org/10.3390/agriculture11030242

Wang, Q., Liu, Ch., Zhao, Y., Kitsos, A., Cannella, M., Wang, S., & Han, L. (2020). Impacts of the COVID-19 pandemic on the dairy industry: Lessons from China and the United States and policy implications. Journal of Integrative Agriculture, 19(12), 2903–2915. https://doi.org/10.1016/S2095-3119(20)63443-8




DOI: http://dx.doi.org/10.17951/h.2025.59.2.87-104
Date of publication: 2025-09-02 13:03:23
Date of submission: 2024-04-24 12:44:21


Statistics


Total abstract view - 0
Downloads (from 2020-06-17) - PDF - 0

Indicators



Refbacks

  • There are currently no refbacks.


Copyright (c) 2025 Sylwester Kozak

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.